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There is a technological threat hidden behind India’s rapidly growing broking industry, which investors rarely pay attention to. Highlighting this risk, Zerodha CEO Nitin Kamath said that one glitch in the trading system can stop the entire market. His warning has raised big questions on the technical strength of the broking platform.
New Delhi. India’s broking industry may be growing rapidly, but there is a risk hidden behind it, which investors hardly notice. Zerodha CEO Nitin Kamath has recently put forward this threat publicly. He says that the entire system of share trading is based on very sensitive technology and if there is even a slight mistake in it, trading can stop completely.
The Heart of Trading: OMS and RMS Systems
According to Nitin Kamath, most brokers do not control the core technology of their trading platform themselves. They depend on third party vendors for Order Management System (OMS) and Risk Management System (RMS). These two systems decide how orders will be processed and how investors’ risk will be managed. Kamath described it as the “heart” of the broking business and clearly said that if this system fails, the entire trading will stop.
Dependence on one place, big danger
Kamath said that the broking industry is dominated by a few tech vendors. Names like OmneNest, Kambala, 63 Moons and Rupeeseed are prominent in this sector. OmneNest alone serves about 70 percent of the brokers, which also includes Zerodha. This centralization is the biggest risk. If for some reason there is a technical glitch in the systems of these vendors, the entire market may be affected. According to Kamath, this is the reason why even a small disturbance can turn into a big crisis.
Why is it difficult to create your own system?
Kamath also told that Zerodha has been working on building its own OMS and RMS system for the last four years. But as important as this work is, it is equally dangerous. Shifting live client positions from one system to another is like rebuilding a flying aircraft in the air. A small mistake can result in trades going wrong, margin calculations failing or investors not being able to exit their positions at all. Additionally, ever-changing regulatory rules demand new changes to the system each time, posing a new risk of breakdown.
Weak link of broking industry
Overall, Nitin Kamath’s warning highlights a weak link in India’s rapidly growing broking industry that has been little discussed so far. Investors may not be able to see all this, but this delicate technical structure works behind their every trade, on which the movement of the entire market depends.
